FTT Embedded Finance


How payment cards can help stabilize the crypto ecosystem

Cryptocurrency is quickly expanding into the financial system, and crypto cards are a fundamental part of this evolution. In many ways, crypto cards work just like traditional credit or debit cards. What makes them unique is that they unlock the value of crypto holdings for everyday use. Additionally, users can convert between digital and fiat currencies as well as connect multiple accounts to the same crypto card.

Crypto cards are an ideal bridge between the existing transaction infrastructure and the growing cryptocurrency ecosystem. They can serve as a stabilizing tool for the asset class because they can promote everyday usage by more people. Thus, cards can help effectively distribute crypto ownership across a larger number of players, making it more difficult for a few actors to shake the market. This can lead to increased stability and help protect the long-term value of crypto holdings.

To fully grasp the power and potential of crypto cards, it’s important to understand the fundamentals of cryptocurrency. Cryptocurrencies exist as tokens on a blockchain. Like the name suggests, a blockchain is a chain of blocks that exist online; each block is filled with a record of transactions made using the native cryptocurrency.

Blockchains are a very powerful system because they create a unified record of transactions that is distributed globally. Most blockchains utilize a cryptographic hash function, hence the term “crypto,” which makes it mathematically difficult to create new blocks or tamper with any existing blocks.

This mathematical verification is combined with a system that double checks the accuracy of the entire chain against thousands of copies. This causes a delay before the addition of each new block, which is referred to as the “block confirmation time.” Only when a block is confirmed is a crypto transaction officially settled.

Block confirmation is central to the advantages of cryptocurrencies. Blockchains are maintained as decentralized consensus systems — this means that copies of the blockchain are maintained on different devices throughout the world, which have to come to an agreement for a new block to be added to the chain. When a new block is proposed, it has to be vetted by hundreds to thousands of different machines globally that collectively agree on the validity of a new block.

While block confirmation times are fundamental to the value of crypto, they also create an impractical delay for everyday transactions. Crypto cards solve this problem because they process a transaction before it settles on the blockchain. This positions crypto card providers as essential facilitators between businesses and consumers transacting with crypto.

Given how quickly this asset class is entering the mainstream, crypto cards have become an even more important part of the landscape. Banking leader J.P. Morgan has helped lead this adoption with the creation of JPM Coin, which is a digital payment vehicle allowing its clients to seamlessly send cross-border payments. Other industry notables like Goldman Sachs have taken big steps towards giving their clients exposure to digital assets as well. But while this mainstream adoption is happening, there are still big questions about crypto’s volatility. Additionally, businesses crave an understanding of how to best safeguard their digital assets. For now, crypto custodial services provided by industry leaders such as Coinbase and Gemini provide the most common storage solution.

As businesses and consumers seek to use crypto more frequently for their daily transactions, the need for a robust payments infrastructure becomes integral. Crypto cards not only offer ease of use, but they can contribute to the stability of these new financial assets.

Hear more from our partners at Marqeta as they lead a discussion on Crypto payments at FTT Embedded Finance North America on September 1. We kick off at 9:00 am PT so register for your complimentary pass now.

Written by Marqeta

You might be interested in last week’s article on How payments cards can take crypto mainstream.